Every January, my inbox floods with predictions for innovation for the year to come. It’s the year of Mobile, or AI, or Blockchain. Investment is going up (it almost always is, somewhere). This or that industry is ripe for disruption.
I tend to scan most of them and move on. However, this year there seems to be a common thread that I think is well worth reflecting on:
Most corporations have by now established corporate innovation as a capability within the organisation. For the past few years, these have largely been tasked to apply the tools and methods of Silicon Valley to the creation of new products for the business. Once these products reach product-market fit, they’re expected to transition to the wider business, where the mature processes and functions of the organisation will take over.
While this approach can work, it is by no means guaranteed. In many cases, we find that what makes an innovation successful is incompatible with the way in which the core business operates. Perhaps it’s a proposition that depends on product-led growth in a sales-led organisation. Perhaps technological mastery is essential but the organisation outsources it’s IT. Perhaps the new product depends on tight cross-functional teams where the main business is strongly architected around functional silos. Whatever the cause, innovation is at its most fragile when a product reaches product-market fit and is ready to scale and generate real value for the business.
Crossing the scale chasm
A lot of pages have been written about this situation, from The Innovator’s Dilemma (one of my favourite classics) to 2021’s The Lean Scaleup, which I’ve just started reading. The proposed solutions considered always straddle the line between finding a way to transform the product so that it fits the organisational model to the other extreme: the standalone Corporate Venture.
There hasn’t been a lot of consensus in the past about a best way to address this problem, but if my inbox is representative, 2022’s answer is emphatically the Corporate Venture. For example, this article from Sifted highlights a pronounced shift from Corporate Accelerators to Venture Builders as the preferred mechanism for corporates in Europe to take the fruits of intrapreneurs and innovation studios to market. Based on my own experience, I can only agree with the trend and celebrate its arrival.
The product is not enough
As corporate innovation matures, we realise that the product, in its narrow sense (say a combination of code, user experience principles and associated support services) is just a component of an innovation. Necessary, but not sufficient for scale and commercial success. Many new products demand being operated by new kinds of people working in new ways, to such an extent that trying to operate these new products in old ways introduces so much risk, cost and treacle that it almost guarantees to kill the innovation at its most promising stage.
Corporate Ventures solve all of these problems, by building a complete, independent but fully-owned business around the innovation and allowing to adapt, iterating rapidly as we do with the product, until the right formula for success and scale is found.
Why the long wait?
Businesses aren’t great at accepting that the very successful ways of working that got them to a position of success are precisely the same ways of working that will stop them from being successful in the future. People’s careers are built on what we did so far. Innovations, even the most promising ones, are never so important as to warrant a complete rework of the entire organisation’s processes just to accommodate them. So we tend to try and make a compromise: a kind of meeting in the middle that risks harming both the business and the new product.
It’s only now, after years of corporate innovation, of failure and success, that we have the maturity to consider whether we may be creating too many roadblocks to success. As ever, it takes a few visionary leaders to show the rest the way. It seems this new year, the Corporate Venture will finally come of age.
I can’t wait to see the ones we’re working on thrive in 2022.